Moody’s upgrades Fortescue’s credit ratings
JOHANNESBURG (miningweekly.com) – Perth-based Fortescue Metals’ efforts to reduce its debt have won it an improved credit rating from ratings agency Moody’s, which this week upgraded the iron-ore miner’s corporate family rating to Ba2 from Ba3, while the senior unsecured and senior secured ratings were upgraded to B1 and Ba1 from B2 and Ba2, respectively.
"The upgrade to Fortescue's ratings reflects the considerable progress that the company made in reducing its debt levels in fiscal 2016 and Moody's expectation that it will continue to reduce debt further in fiscal 2017," Moody’s VP and senior credit officer Matthew Moore said in a statement.
"The debt reduction, in part facilitated by average iron-ore prices that were higher than Moody's previous expectations for 2016, has led to a significant improvement in leverage metrics for Fortescue," added Moore. "The company's ongoing cost and debt reduction initiatives will allow it to maintain conservative financial metrics over the next 12 to 24 months under Moody's base case sensitivity for iron-ore prices."
Continued execution on Fortescue's cost reduction initiatives – along with higher prices – have led to strong free cash flow generation. This development and Fortescue's large cash balances have allowed it to implement its debt reduction plans and repay around $2-billion of debt in the 2016 financial year.
Fortescue has reduced its total reported debt levels by about 47% since the 2012 financial year.
"While Moody's expects iron-ore prices to remain volatile with risk to the downside, Fortescue's initiatives to reduce cost and debt levels and the prospects for further debt reduction improves its ability to manage this volatility, while maintaining solid metrics for the rating," said Moore.
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